Burlington Telecom trial opens with Leopold testimony

Ex-city administrator denies wrongdoing, says he did not benefit from his actions

Feb. 28, 2014

Former Burlington Chief Administrative Officer Jonathan Leopold testifies in Vermont Superior Court on Wednesday. Leopold is being sued by two Burlington residents over his role in diverting city funds to support Burlington Telecom. / GLENN RUSSELL/FREE PRESS

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Free Press Staff Writer

Fred Osier, left and Eugene Shaver exchange words Wednesday in Chittenden Superior Court in Burlington. The two attended the second day of a trial in their lawsuit against former Burlington Chief Administrator Jonathan Leopold. / JOEL BANNER BAIRD/Free Press

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The lawsuit in Chittenden Superior Court against former Burlington Chief Administrative Officer Jonathan Leopold pivots around a single decision — one that is not in dispute.

Leopold, called as a witness by the plaintiffs, agreed: In violation of the city charter and state regulations, from 2008-09, he had approved the transfer of $16.9 million from the general fund to Burlington Telecom.

But several key questions took shape during the trial’s opening day Wednesday:

• When did the CAO recognize the violations as illegal, and to what extent, if at all, did he conceal or delay their disclosure?

• To what extent did Leopold rely on Burlington Telecom management to steer his judgment?

The case was filed in 2009 on behalf of Burlington taxpayers by former city councilors Fred Osier and Eugene Shaver, who call for Leopold (or his insurance company) to return the money to the general fund.

Leopold denies wrongdoing and says he did not benefit financially from his actions. Osier and Shaver allege he did benefit — by keeping his city job.

Leopold took the stand for several hours Wednesday to describe a bureaucratic and financial predicament that began when he, along with newly elected Mayor Bob Kiss, assumed oversight of the city-owned provider of phone, Internet and television service in 2006 — and how the predicament accelerated during the financial meltdown in late 2007.

The project began under the previous administration of Mayor Peter Clavelle. Leopold said BT’s momentum and potential were touted regularly by then-General Manager Tim Nulty, until Nulty left the post in October 2007.

Leopold’s narrative took detours through dozens of bookmarked, cinder-block-sized binders bursting with emails, memos and evidence of mounting concern from the Vermont Department of Public Service and its quasi-judicial body, the Public Service Board.

Two conditions in the Burlington Telecom’s Certificate of Public Good vexed the Kiss administration, Leopold said:

• Condition 17 mandated a rapid build-out throughout the city.

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• Condition 60, to protect municipal taxpayers, prohibited transfers to BT from the city cash pool unless those loans were repaid within 60 days.

Leopold said he made Condition 17 a priority and decided the city’s cash pool would speed construction. Burlington Telecom, he estimated, ultimately would generate enough revenues to pay back the loan.

A court document, projected on the courtroom wall, hinted at the broader risk. In an email exchange with the city’s legal team led by Bill Ellis of McNeil, Leddy & Sheahan, Leopold wrote that state regulators were seemingly unaware of the Condition 60 violation, and that “we should let sleeping dogs lie.”

Leopold summarized his predicament: “When you have a situation of conflicting requirements, you have to choose which requirements you must support under the circumstances.”

Earlier testimony from Norman Walker, a retired CPA and former professor of accounting at St. Michael’s College in Colchester, steered the discussion closer to numerical values.

In financial statements to the City Council issued between 2007 and 2010, Walker said, Leopold omitted posting $19.8 million in expenditures that clearly would have signaled the telecom’s financial distress and the regulatory violations.

Contrary to the city’s mandate, Walker said, the administration’s off-the-books payouts “exceeded what was properly authorized.”

Judge Helen Toor listened to what she characterized as both sides’ sometimes complex time lines of disclosure and of regulatory learning curves encountered by Leopold, the City Council and Mayor Kiss.

Toor is hearing the case and will decide its outcome, rather than having a jury do so.

Earlier in the day, Toor asked that any potential witnesses leave the courtroom.

Kiss, who had been sitting in a back row, exited.

Among other potential witnesses is City Council President Joan Shannon, D-Ward 5, who, about five years ago, co-authored a resolution to dismiss Leopold for his handling of Burlington Telecom finances.

The trial continues Thursday and will reconvene Monday and Wednesday next week.